October 18, 2013 7:21 pm

US politics: They blinked

Obama’s ability to capitalise on his political victory will be complicated by new fiscal battles with Republicans
Back to work: President Barack Obama makes a statement on the reopening of government after he signed a law ending the shutdown and extending the US debt limit

Back to work: President Barack Obama makes a statement on the reopening of government after he signed a law ending the shutdown and extending the US debt limit

It is a measure of the state of US politics that Barack Obama bonded instantly with the first foreign visitor to the White House after he signed the bill to reopen the government: Italy’s Enrico Letta.

Mr Obama congratulated the Italian prime minister on his recent success in passing a budget, which came after Mr Letta had repelled Silvio Berlusconi’s attempt to bring down his government. And Mr Letta praised Mr Obama’s victory in his own fiscal fight with the Republican right. “His success (is also) our success,” Mr Letta said.

The final vote in Congress near midnight on Wednesday was greeted in Washington with a sense of relief akin to the end of a military conflict. The next morning, however, outside the sunny encounter in the Oval Office with Mr Letta, the mood was already turning sombre as the casualties were counted.

After all, the deal lasts for all of about three months before a chronically crisis-driven US political system must once again get over the familiar hurdles: passing a budget and extending the nation’s borrowing capacity. The fight has been deferred, not solved. “Live and learn,” Lindsey Graham, a Republican senator from South Carolina, said sardonically as the deal emerged. “We’ll be doing this again in a couple of months.”

In the end, the system prevailed, but only at the last moment when the two warhorses who lead their respective parties in the Senate, Harry Reid of the majority Democrats and Mitch McConnell of the Republicans, thrashed out an agreement 24 hours before the deadline to renew the country’s borrowing authority.

The Senate deal was imposed on the House of Representatives, where the Tea Party faction had forced John Boehner, the speaker and nominally the most powerful Republican in Washington, into a corner he had struggled for months to stay out of: making budget approval conditional on gutting Mr Obama’ signature health law.

In the fight that followed, the US economy was drained of billions of dollars and a simmering dispute between the Republican party’s establishment and its Tea Party wing escalated into a full-blown civil war.

Mr Obama won his confrontation with the Republicans, and not only because he was the least of the losers. As he surveys the damage, he is also savouring a significant victory. For the remainder of his presidency, he has established the principle the he will not negotiate in the shadow of the threat of sovereign default. “This was Obama’s number one priority in this negotiation,” said John Podesta, a former chief of staff to Bill Clinton who has also advised the Obama administration. “He said, ‘I am going to break (the Republicans) on the debt limit’, and he succeeded.”

It was a pledge that Mr Obama made to himself after getting badly bloodied when budget negotiations were tied to approval of new US government borrowing in August 2011. Time and again in recent weeks, Republicans had expected Mr Obama to weaken but he held firm.

Mr Reid ran the operation on Capitol Hill with an iron hand, demanding that Joe Biden, the vice-president who had cut last-minute budget deals with his former Senate colleagues over the past two years, be sidelined.

Mr Reid may look like a suburban accountant and speak in a barely audible whisper but the former amateur boxer fought his corner brutally, assailing the Republicans on the Senate floor and refusing point-blank to discuss Mr Obama’s health law.

The drip-drip of negative polling and their own deep internal divisions sapped the Republicans’ will until they dropped all of their initial demands. “If we cannot pass something on Republican votes without relying on Democrats, our position is weak from the start,” said Charles Boustany, a Republican from Louisiana. “We have made that mistake over and over again.”

The Republican leadership hopes the Tea Party has learnt its lesson on budget brinkmanship as well. Mr McConnell, of Kentucky, who supplanted Mr Boehner as the lead Republican negotiator in successive budget battles, appeared to draw a line under government closures in the near future. The Republicans lost the political battle to Mr Clinton in the two shutdowns in 1995 and 1996, and Mr McConnell believes the party has been damaged again.

“One of my favourite old Kentucky sayings is ‘there’s no education in the second kick of a mule’,” he told The Hill newspaper. “The first kick of a mule was when we shut the government down in the mid-1990s, and the second kick was over the last 16 days. I think we have now fully acquainted our new members with what a losing strategy that is.”

Mr McConnell has an extra incentive to protect the GOP’s brand. His party has a chance of regaining the Senate in 2014 but he fears that another shutdown would only give a platform to Republican hardliners and throw the election away.

While pundits ponder the winners and losers, the policy gains are almost non-existent. Out of all the trauma, Democrats and Republicans have made one agreement: to sit down to try to reconcile their respective budgets. This used to be standard congressional practice, but they have not managed to do it since 2009.

Even then, a big budget deal before the committee’s deadline of December 15 is likely to be elusive, as Democrats seek to protect social spending and the Republicans refuse demands for extra tax revenues. “That’s a trade and it’s just not there,” said Douglas Holtz-Eakin, a former budget director under George W. Bush.

The roots of US political dysfunction are many. Members of Congress have largely lost any incentive to compromise, as more and more shelter in districts with their boundaries redrawn to make them safe; and the post-crisis era of tepid growth means there is little spare money to grease the wheels of cross-party deals.

But the near-term causes of the October confrontation can be traced to January, when Republican members of Congress gathered at a resort in Williamsburg, Virginia.

In just a few months, the party had failed to prise Mr Obama out of the White House, fallen short of regaining the Senate and been forced to stomach tax rises in an end-of-year budget deal. “It was probably the low point in our conference,” said Mick Mulvaney, a South Carolina congressman.

During last year’s campaign, Mr Obama had said his re-election could “break the fever” among Republicans and persuade them to work with the White House on budgets. But at the conference in Williamsburg, conservative Republicans grabbed hold of the reins of the party and moved its centre further to the right.

“We committed to balancing the budget in 10 years without tax increases, and you can’t do ‘Obamacare’ (the president’s healthcare law) and you can’t continue to ignore the rest of the entitlement spending,” said Tim Huelskamp, a Kansas Republican and a standard bearer of the Tea Party caucus. “That was our goal and what we agreed to as Republicans.”

Mr Boehner resisted putting Obamacare at the centre of the budget fight until he was overwhelmed by a campaign launched by conservative lobby groups, spearheaded by a new Texas senator, Ted Cruz.

Mr Cruz, a Harvard graduate whose wife works at Goldman Sachs, emerged as the scourge of the Republican establishment. He toured Tea Party meetings, describing in near-biblical terms “the enormous harm that Obamacare was visiting on the American people”.

His chief backer was Heritage Action, the newly formed campaign arm of the Heritage Foundation, a think-tank that has long provided policy ideas to conservatives in Congress. Under its new leader, former senator Jim DeMint, the foundation wants not just to advise congressional Republicans but also to bend them to its will.

About a week into the shutdown, Michael Needham, 31-year-old director of Heritage Action, was asked if his group wanted to provoke a “massive crackup” of the Republican establishment. “I’m pretty optimistic that it’s going to happen,” he replied, “and it’s going to happen pretty soon.”

Mr DeMint says the fight was worth it and Mr Cruz, who has presidential ambitions for 2016, is unbowed. But Republicans in the Senate are furious. “There’s a real question in the minds of many Republicans now,” Orrin Hatch, the veteran Utah senator, told MSNBC. “I’m not just speaking for myself – is Heritage going to go so political that it really doesn’t amount to anything any more?”

Mr Obama has emerged stronger from the budget fight and has an ambitious agenda for the coming months. At the top of the list is immigration reform. The US also wants to conclude a trade deal with Asia-Pacific nations by year’s end.

But the trench warfare over the budget complicates everything. “That is the biggest damage,” says Mr Holtz-Eakin. “The opportunity cost of these other issues is so much higher.”

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